Free Trade Vs. Protectionism Debate

As the global economy expands, free trade vs. protectionist arguments continue to be actively debated. Beyond arguments about the effects on jobs and access to affordable goods, concerns about labor conditions in developing countries, the impact on the environment and national security add a new layer of complexity to the discussion.

The Basics

Free Trade

Proponents of free trade argue that it strengthens the economy and improves international relationships. Increased competition encourages innovation and lowers prices as manufactures compete for market share. Access to low cost, high quality products means people spend less on necessities. As a result, they have more disposable income to spend on local services and luxury goods. Supporters of free trade policies argue that this increase in disposable income creates demand for service sector jobs which replace low-skilled jobs lost to overseas competition, netting a positive effect on the community despite the shift in available job opportunities.

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Protectionism

Supporters of the protectionist view argue that tariffs and trade laws protecting local businesses are essential to maintaining a healthy economy. Protectionists fear that in order to keep prices low, companies otherwise will shift their hiring practices to employ workers in areas with a lower cost of living. This results in high unemployment and a significant reduction in quality of life domestically.

Key Issues

Impact on Jobs

Both sides argue that their approach will have a positive impact on job growth.

Free trade proponents suggest that increased competition increases the availability of innovative jobs as companies strive to create new products and expand to target export markets. They argue that the jobs shifted overseas tend to be low-skilled, entry level jobs, and that local workers can be transitioned into other jobs. Increases in disposable income among the middle and upper classes lead to an increased demand for new products and services, leading to the creation of new jobs.

Protectionists counter that the loss of industries is devastating to local economies and that there aren't enough service and entry level jobs to compensate for the dramatic job losses that occur when companies shift their workforces. In addition, entry level service jobs -- such as customer service positions -- are increasingly outsourced to overseas call centers as well, leaving few opportunities for displaced workers.

Access to Low Cost Goods

Supporters of free trade argue that access to low cost goods strengthens the economy. Low income people, who might not otherwise be able to afford necessities, benefit the most from low cost alternatives. However, free trade proponents observe that low cost alternatives free up additional disposable income for middle and upper income people as well. Increased disposable income stimulates the economy and benefits everyone when it is invested in additional goods and services.

Increases in disposable income only happens when jobs remain intact, according to protectionists. Protectionists argue that at least some industries must remain protected in order to ensure a healthy employment rate. Small towns dependent on single industries, as well as emerging technologies that may need government protection to develop, are especially vulnerable. In this view, temporary protections, granting time for retraining workers and giving new businesses time to gain traction all strengthen local economies and the overall strength of the US economy.

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Free Trade vs. Fair Trade

Human rights and environmental concerns also play a part in the debate as a special form of protectionism. Beyond protecting local businesses, people are increasingly concerned that the workforces in developing nations sometimes employ forced labor or child labor pools and that the factories in developing nations don't always consider the impact on the environment. As a result, fair trade supporters seek to establish minimum international standards for human rights and environmental impact, limiting free trade in a new, global way.

National Security

Healthy trade relations strengthen diplomatic relationships and reduce international tensions. Consistent with free trade policies, mutually beneficial trade policies may lead to peaceful relationships between nations. However, many governments worry that too much interdependence will leave them vulnerable. Some protections for the production of essential goods may safeguard the nation in times of emergency. Beyond times of war, natural disasters or other tensions between any country and supplier of essential goods could be catastrophic. Therefore, many administrations support protections for certain industries -- such as defense.